BCW Companies Q1 Financials May Hinge on Exchange Rates

Next week, eight of the 15 BioCommerce Week Index companies will report financials for the first three months of 2005 after General Electric kicked off the season last week (see article). So far, it looks like a resurgent dollar may affect the revenue growth of a number of these multi-platform molecular biology tools companies.

Waters, Applied Biosystems and Sigma-Aldrich report on Tuesday, followed by Thermo Electron, PerkinElmer, and Becton Dickinson on Wednesday, and Bio-Rad and Bruker on Thursday.

Adam Chazan, an analyst with Pacific Growth Equities of San Francisco, this week said that the dollar's 5-percent rise against the euro and yen in the quarter ending March 31 is the most significant "intra-quarter [currency-exchange] reversal" in three years. This change may stifle the currency-exchange benefits under which the firms of the BCW Index have been sailing.

On Wednesday, OANDA.com, an online currency exchange information service, said the euro is up 8.8 percent against the dollar in the past year, but down 1.89 percent in the last month. Against the yen, the dollar is down 0.92 percent for the year, but up 1.94 percent in the last month.

Many of these 15 BCW Index companies have benefited from a weak dollar, particularly against the stronger euro. With sales transacted in euros and yen, but reported in dollars, most of these companies have reported currency exchange benefits ranging from 3 percent to 7 percent for the quarter ending Dec. 31. Thus, any strengthening of the dollar against the euro and the yen may serve to knock down these revenue benefits for the quarter and certainly bear watching.

For example, Chazan expects currency movements in the quarter to help ABI's revenues, as the company derives 30 percent and 20 percent of sales from Europe and Asia, respectively. In the quarter ending Dec. 31, ABI sales in Europe increased 25 percent, including currency-exchange benefits of 7 percent, while Asia sales fell 7 percent. The company did not provide specific details on the currency-exchange benefit for the Asia region but said that it did see a positive impact from exchange rates in Asia.

Waters, which rocked the mass-spectrometry market by drastically cutting its first-quarter revenue and earnings projections in early April based on diminished expectations from European pharma sales (see BCW 4/7/2005) of its mass-spec platforms reported fourth-quarter 2004 sales of $324.2 million, an increase of 18 percent over sales of $275.1 million in the fourth quarter of 2003, with a 4 percent currency-exchange benefit.

Sigma-Aldrich, which notes that over 50 percent of its sales are made in currencies other than the dollar, benefited 6 percent in the last quarter from currency exchange rates, and said it expects to see sales growth of 18 percent to 21 percent in 2005 — if exchange rates remain unchanged.

Thermo Electron executives told analysts in the fourth quarter, after reporting a 4 percent benefit from currency exchange rates, that it would function under the assumption that exchange rates would remain stable in 2005.

PerkinElmer's fourth-quarter sales benefited 3 percent overall in the fourth quarter from exchange rates on a weak dollar, the company said in its conference calls.

Bruker's two business segments both benefited from exchange rates in the fourth quarter, with its AXS business taking a 4 percent increase, and its Daltonics segment recording a 7 percent increase.

Becton Dickinson reported a 6 percent exchange-rate benefit from revenues received from outside the US and 3 percent across the company driven by a strong euro.

Bio-Rad, however, went against the grain in reporting $16 million in negative currency impacts for the previous quarter and said it expects growth of mid- to high-single digits in 2005 — again, like others, assuming currency exchange rates remain the same.

— Mo Krochmal ([email protected])